WEBVTT - Should Central Banks Be Responsible for Saving the World? 0:00:00.560 --> 0:00:05.040 I think this conference is an opportunity to foster the 0:00:05.080 --> 0:00:09.960 interaction between female scholars and to strengthen our network. Men 0:00:10.000 --> 0:00:12.640 are pretty good at that. We are not, and we've 0:00:12.720 --> 0:00:20.079 better improve. Hello and welcome to Stephanomics, the podcast that 0:00:20.120 --> 0:00:24.000 brings the global economy to you. Now, I've recently done 0:00:24.040 --> 0:00:26.479 something I've never done before, and I thought it was 0:00:26.480 --> 0:00:30.319 worth sharing. For this week's podcast, I sat down with 0:00:30.480 --> 0:00:34.840 three senior policymakers to talk about how central banking could 0:00:34.840 --> 0:00:38.240 make the world a better place. And the senior policymakers 0:00:38.240 --> 0:00:42.640 in question were all women. That panel was part of 0:00:42.640 --> 0:00:46.239 a special conference on macroeconomics and finance co sponsored by 0:00:46.240 --> 0:00:49.720 the European Central Bank and the European think tank, the 0:00:49.760 --> 0:00:53.560 Center for Economic Policy Research, and it wasn't so different 0:00:53.600 --> 0:00:57.840 from other academic conferences I've been to, interesting cutting edge 0:00:57.840 --> 0:01:01.240 papers on topics like the impact of monetary policy on 0:01:01.400 --> 0:01:05.479 racial inequality or whether low interest rates make the economy 0:01:05.560 --> 0:01:09.080 less efficient. While they were interesting to me anyway, the 0:01:09.160 --> 0:01:12.400 only thing that was different about this super brainy conference 0:01:12.880 --> 0:01:16.040 was that every single one of the contributing speakers was 0:01:16.080 --> 0:01:20.720 a woman. Now, you might not think this kind of statement. 0:01:21.240 --> 0:01:24.560 Women's conference was really necessary in this day and age. 0:01:24.920 --> 0:01:28.160 Don't you find senior women economists popping up all over 0:01:28.160 --> 0:01:31.240 the place, But you'd be wrong. As the President of 0:01:31.240 --> 0:01:34.920 the European Central Bank, Christine Legarde explained when she launched 0:01:34.920 --> 0:01:39.399 the event, the twenty twenty report published by the American 0:01:39.440 --> 0:01:44.360 Economic Association shows that women make up only twenty of 0:01:44.440 --> 0:01:48.640 the PhD granting economics faculties in the United States, and 0:01:48.760 --> 0:01:51.960 most of those women do not hold tenure tribal positions. 0:01:52.560 --> 0:01:57.560 And the share of female fool professors is only in Europe, 0:01:57.960 --> 0:02:00.360 and it is estimated that the figure is that we 0:02:00.400 --> 0:02:05.640 have at the moment actually decreased to twelve when considering 0:02:05.800 --> 0:02:10.240 top research institutions and more senior position. So it's not 0:02:10.320 --> 0:02:14.080 a very rosy picture, despite sometimes the impression that we 0:02:14.160 --> 0:02:17.760 have that a lot of progress that has been made. No, 0:02:18.320 --> 0:02:23.919 and this gender imbalances need to be addressed, broadening women's 0:02:23.960 --> 0:02:27.480 participation in the economics profession and removing the obstacles they 0:02:27.480 --> 0:02:30.400 are they face pursuing a career. It's not just a 0:02:30.440 --> 0:02:33.119 matter of fairness, which in and of itself would be sufficient, 0:02:35.400 --> 0:02:41.680 but it's also needed because preventing women from participating and 0:02:41.760 --> 0:02:46.480 achieving leadership roles. It's just detrimental to society as a whole. 0:02:47.200 --> 0:02:50.880 There have been multiple studies pointing to that. A recent 0:02:50.960 --> 0:02:54.360 one by the International Monetary Fund, of course, found that 0:02:54.400 --> 0:02:57.080 the presence of women on the boards of financial and 0:02:57.200 --> 0:03:03.280 supervisory institutions was associated did with greater resilience, less risk taking, 0:03:03.760 --> 0:03:08.320 an increased stability. No, maybe we don't want any of that. 0:03:08.520 --> 0:03:12.840 But I have my hunch that maybe we want stability, 0:03:12.960 --> 0:03:15.919 maybe we want a bit less risk taking, and maybe 0:03:15.960 --> 0:03:19.799 we design greater resilience. And that is the reason why 0:03:19.800 --> 0:03:23.520 it is so important to have events like today's conference, 0:03:24.480 --> 0:03:30.120 not just to advocate and identify obstacles, as I have 0:03:30.280 --> 0:03:34.560 just done, but to show that we mean business and 0:03:34.639 --> 0:03:37.560 the research that we conduct and the policies that we 0:03:37.680 --> 0:03:41.640 recommend and the analytical work that is behind it is 0:03:41.680 --> 0:03:48.080 of superb quality. When we'll demonstrate perfectly that of course 0:03:48.120 --> 0:03:53.480 we can do it, and of course women business. Now, 0:03:53.480 --> 0:03:55.960 as I said, most of the conference was a bit technical, 0:03:56.240 --> 0:03:58.240 but that planel I hosted at the end of the 0:03:58.280 --> 0:04:01.120 first day was on a subject everyone ought to care 0:04:01.160 --> 0:04:06.480 about the social responsibilities of central banks, and the lineup, well, 0:04:06.800 --> 0:04:09.640 it doesn't get much better. You can judge for yourself 0:04:09.840 --> 0:04:21.000 in this edited version of our conversation and enjoy. After 0:04:21.040 --> 0:04:28.120 this great day of academic and path breaking discussion, we 0:04:28.240 --> 0:04:31.920 have a big topic to discuss, how central banks can 0:04:31.960 --> 0:04:36.520 support a new social contract. Now I'm conscious that some 0:04:36.640 --> 0:04:38.800 would say, maybe many would say, that the best way 0:04:38.839 --> 0:04:41.080 for central banks to support a new social contract is 0:04:41.120 --> 0:04:44.039 to keep well clear and to focus just on their knitting, 0:04:44.120 --> 0:04:49.359 on controlling inflation and letting politicians worry about things like society, 0:04:49.440 --> 0:04:52.240 because that's what politicians are elected to do. And if 0:04:52.279 --> 0:04:55.520 our conception of a better social contract in this discussion 0:04:55.600 --> 0:05:00.000 is going to also include an effective response to climate change, 0:04:59.520 --> 0:05:02.520 which suspect it will, I think there are many people 0:05:02.880 --> 0:05:05.640 who have been who have said that central banks should 0:05:05.800 --> 0:05:09.560 keep well clear of that too. But if we've learned anything, 0:05:10.400 --> 0:05:14.280 especially in the response to the global financial crisis in 0:05:14.320 --> 0:05:18.560 the pandemic, it's the central bank policies can have very 0:05:18.600 --> 0:05:21.840 big social and political consequences, whether we like it or not. 0:05:22.560 --> 0:05:25.440 We'll be talking about all of this and much more 0:05:25.480 --> 0:05:27.200 in this session, so let's let me get on with 0:05:27.240 --> 0:05:30.600 introducing them and we can get started. Um. Dr Isabel 0:05:30.720 --> 0:05:33.080 Schnabel has been a member of the European Central Banks 0:05:33.080 --> 0:05:37.880 Executive Board for since the start of She's also been 0:05:37.920 --> 0:05:40.560 a member of the German Council of Economic Experts, and 0:05:40.600 --> 0:05:43.159 I think it is still a professor of financial economics 0:05:43.200 --> 0:05:48.240 at the University of Bonn Baroness minus. Chefik is now 0:05:48.360 --> 0:05:51.360 director of the London School of Economics, having more or 0:05:51.400 --> 0:05:54.160 less run out of senior policy jobs to do. Before that, 0:05:54.240 --> 0:05:56.480 she's served as a Deputy Governor of the Bank of England, 0:05:56.520 --> 0:06:01.120 as senior civil servants at the International Department of International 0:06:01.120 --> 0:06:04.040 Development in the UK, and as senior official at both 0:06:04.080 --> 0:06:06.120 the i m F and the World Bank. She also 0:06:06.200 --> 0:06:08.680 just happens to have written a book What We Owe 0:06:08.720 --> 0:06:12.960 each Other a new social Contract recently, which I suspect 0:06:13.040 --> 0:06:16.279 will will come up in this discussion. And finally we 0:06:16.360 --> 0:06:20.080 have Dr Carmen Reinhardt, very well known to everybody here, 0:06:20.160 --> 0:06:23.159 I know, Chief Economists of the World Bank since last 0:06:23.240 --> 0:06:26.920 year and currently on leave from her position as Professor 0:06:26.960 --> 0:06:32.560 of the International Financial System at Harvard's Kennedy School of Government. Ladies, welcome, 0:06:32.680 --> 0:06:37.600 so glad to be here, Minutia Fik, thank you so much, Stephanie. 0:06:37.960 --> 0:06:40.720 The core Mandate of Central Banks and the best thing 0:06:40.760 --> 0:06:43.360 we can do for the social contract is to deliver 0:06:43.880 --> 0:06:46.720 both price and financial stability, because we all know that 0:06:47.000 --> 0:06:50.400 episodes of high inflation hurt the poor the most, and 0:06:50.440 --> 0:06:53.120 we've seen that in many many countries, and so and 0:06:53.440 --> 0:06:56.800 similarly with episodes of financial and stability because they have 0:06:56.880 --> 0:07:00.400 the least fewest tools to ensure themselves and protect themselves 0:07:00.400 --> 0:07:05.679 from those shocks. But I also think that central banks 0:07:05.720 --> 0:07:09.400 need to be aware of the social consequences of their 0:07:09.440 --> 0:07:16.520 policies and also be aware of how social policies affect 0:07:16.600 --> 0:07:19.920 central banking. And let me just give two examples on 0:07:19.960 --> 0:07:25.280 the first point, how their policies affect social and political consequences. 0:07:25.320 --> 0:07:27.880 There's been a huge debate, as we all know, around 0:07:28.320 --> 0:07:33.720 how recent fairly aggressive monetary policies and quantitative easing have 0:07:33.840 --> 0:07:37.400 affective income distribution, and there's been quite a lot written 0:07:37.400 --> 0:07:40.240 in central banking circles around that. Now we know that 0:07:40.280 --> 0:07:43.280 the effect of monetary policy on income distribution is complex 0:07:43.320 --> 0:07:47.360 and operates through multiple channels. Lower income households are more 0:07:47.440 --> 0:07:51.360 likely to lose their jobs during recessions, and so looser 0:07:51.440 --> 0:07:54.280 monetary policy is likely to increase employment and be good 0:07:54.320 --> 0:07:57.800 for them. On the other hand, richer households tend to 0:07:57.800 --> 0:08:00.840 have more assets and are likely to benefit from loose 0:08:01.040 --> 0:08:03.960 monetary policies through the asset price channel, and so the 0:08:04.000 --> 0:08:07.600 net effect is an empirical question, and it can vary 0:08:07.840 --> 0:08:11.120 across countries and across times. Now, I don't think central 0:08:11.120 --> 0:08:13.480 banks should be setting monetary policy with a view to 0:08:13.520 --> 0:08:17.640 altering income distribution, which is a deeply political thing and 0:08:17.640 --> 0:08:20.640 should be left in the hands of elected politicians. As 0:08:20.680 --> 0:08:24.440 Stephanie implied them from introduction, the central banks should be 0:08:24.480 --> 0:08:28.040 aware of the consequences of monetary policy for income and 0:08:28.120 --> 0:08:32.760 wealth and collect data on these impacts and provide analysis 0:08:32.840 --> 0:08:36.199 to the fiscal authorities so that they are well informed 0:08:36.240 --> 0:08:39.880 and if necessary, can act on that information. They should 0:08:39.920 --> 0:08:43.080 be paying attention to whether their policies have different impacts 0:08:43.080 --> 0:08:45.959 on different groups like women or different parts of a country, 0:08:46.400 --> 0:08:50.000 and again not to alter their policies, but to inform 0:08:50.120 --> 0:08:53.880 those whose mandated is to worry about those issues about 0:08:53.880 --> 0:08:56.760 the potential consequences. Let me give an example of the 0:08:56.800 --> 0:09:00.760 opposite point, which is how do so show and political 0:09:00.800 --> 0:09:05.280 policies affect central banking. One of the most important debates 0:09:05.320 --> 0:09:08.240 we're having these days is you know why the debate 0:09:08.280 --> 0:09:12.680 about secular stagnation. Now we know interest rates or have 0:09:12.760 --> 0:09:16.319 been at historic lose because global savings is high relative 0:09:16.320 --> 0:09:19.839 to global investment. And why are global savings high Because 0:09:19.840 --> 0:09:23.959 people face insecurity and populations are aging, which is why 0:09:24.000 --> 0:09:26.400 of course interest rates are lowest in the parts of 0:09:26.400 --> 0:09:29.640 the world that are aging the most, like Japan and Europe, 0:09:30.440 --> 0:09:33.440 and this results in a tendency to hoard savings, which 0:09:33.440 --> 0:09:36.800 reduces demand for goods and services and slows rates of 0:09:36.800 --> 0:09:40.480 economic growth. And if we had better social insurance, we 0:09:40.559 --> 0:09:45.200 could reduce this risk of secular stagnation. So, for example, 0:09:45.679 --> 0:09:50.439 Chinese households save about thirty of their incomes, in part 0:09:50.559 --> 0:09:55.319 because until recently they didn't have unemployment insurance or health 0:09:55.360 --> 0:10:00.240 insurance or reliable pensions. And so as social insurance is 0:10:00.280 --> 0:10:05.199 increasingly introduced in China, those really high savings rates could 0:10:05.200 --> 0:10:08.240 come down. And on the other side of the equation, 0:10:08.320 --> 0:10:11.839 investment is very low because governments haven't created an environment 0:10:12.400 --> 0:10:16.360 where firms see good opportunities to grow. But many elements 0:10:16.400 --> 0:10:19.920 of the social contract, such as more investment in education 0:10:20.520 --> 0:10:25.359 or infrastructure to reduce carbon emissions, could actually increase demand, 0:10:25.480 --> 0:10:30.240 especially in developing countries where profitable opportunities exist if risks 0:10:30.280 --> 0:10:33.840 can be reduced. And so the problem of secular stagnation 0:10:34.480 --> 0:10:37.760 is not one that central bankers and monetary policy can solve, 0:10:38.520 --> 0:10:43.280 but a better social contract could. And so central bankers 0:10:43.360 --> 0:10:47.600 should be happy to see policies like social insurance or 0:10:47.720 --> 0:10:52.600 support to families and education, or green investment incentives because 0:10:52.640 --> 0:10:57.120 they helped reduce the need for precaution re savings, they 0:10:57.240 --> 0:11:00.360 increase the level of global investment, and they help us 0:11:00.360 --> 0:11:04.360 avoid the risks of secular stagnation. So I would I 0:11:04.360 --> 0:11:09.640 would close that coming right hot. Thank you Stephanie, and 0:11:09.720 --> 0:11:13.200 thank you for for the organizers to to invite me 0:11:13.280 --> 0:11:16.800 to this wonderful event. I also have to say that 0:11:17.040 --> 0:11:22.280 we are well passed the view where you know central 0:11:22.280 --> 0:11:28.600 bankers are uh these suit clad men uh that we 0:11:28.720 --> 0:11:32.800 have typically associated with central banking. Very much thanks to 0:11:33.480 --> 0:11:38.160 Janet Yellen and and and Madame Legarda and of course 0:11:38.240 --> 0:11:41.240 many others around the world. I do want to echo 0:11:41.480 --> 0:11:45.439 very much what we knew should pointed out on on 0:11:45.480 --> 0:11:52.479 the importance of not short changing the mandate of price stability. 0:11:53.200 --> 0:11:55.880 One thing that hasn't been mentioned in the panel is 0:11:55.920 --> 0:12:00.600 that headline inflation does grab. That's why it's called headline 0:12:01.200 --> 0:12:05.160 UH the attention of the public. But at the very 0:12:05.280 --> 0:12:12.200 near nitty gritty level food price inflation, which usually UH 0:12:12.360 --> 0:12:17.640 exceeds headline inflation. In effect, relative food prices tend to 0:12:17.760 --> 0:12:24.760 increase disproportionately, So we can't lose sight that that inflation 0:12:24.800 --> 0:12:28.920 as a whole is extremely regressive. It is regressive for 0:12:29.000 --> 0:12:31.400 many of of the reasons that the panel is have 0:12:31.480 --> 0:12:35.160 pointed out, but I would add that the food dimension 0:12:35.480 --> 0:12:39.920 is critical. I would stress that an important part of 0:12:39.960 --> 0:12:45.880 that social contract is ensuring that the price stability that 0:12:45.960 --> 0:12:50.920 has been achieved UH in central banks, that we should 0:12:50.960 --> 0:12:56.040 not at any moment loose sight of that mandate. UM. 0:12:56.080 --> 0:12:59.880 I would also add that, unfortunately for all of us 0:13:00.040 --> 0:13:04.640 who were economists, economists don't have a great track record 0:13:05.320 --> 0:13:09.800 in predicting turning points, and I think we are at 0:13:09.840 --> 0:13:13.120 a very tough spot here. On one hand, you have 0:13:14.000 --> 0:13:21.200 the concerns that premature tightening would undermine a recovery from 0:13:21.280 --> 0:13:26.080 the worst hit that the global economy to my knowledge, 0:13:26.240 --> 0:13:31.320 has seen. We're coming out of a very exceptional period, 0:13:31.400 --> 0:13:36.000 so there's the concerns of undermining the recovery. But at 0:13:36.080 --> 0:13:39.559 the same time. US inflation rates are at a thirty 0:13:39.640 --> 0:13:41.679 year high. If you look at consumer prices, and if 0:13:41.720 --> 0:13:44.960 you look at producer prices there are forty year high. 0:13:45.240 --> 0:13:49.560 And the concern of acting too late, too little, and 0:13:49.600 --> 0:13:53.760 too late is a very real one. Is a very 0:13:53.840 --> 0:13:57.160 real one. In the aftermath of two thow th nine, 0:13:57.160 --> 0:14:00.520 we were, especially in the advanced economies, not so in 0:14:00.559 --> 0:14:06.800 the emerging markets, we were confronted with massive aggregate demand 0:14:07.640 --> 0:14:11.840 declines UH. In the current context, fast forward to COVID, 0:14:12.520 --> 0:14:16.679 we have both. We are both dealing with exceptional UH 0:14:16.800 --> 0:14:21.760 declines in aggregate demands but also all manner of aggregate 0:14:21.800 --> 0:14:27.960 supply shops. So, and a lesson from the nineties seventies 0:14:28.120 --> 0:14:34.600 that was that central banks ability to stabilize economic activity 0:14:35.080 --> 0:14:40.840 in the face of supply shops is much much much 0:14:41.320 --> 0:14:45.800 to be questioned. UH, it's much more limited. So so 0:14:46.080 --> 0:14:48.200 we also have the danger I said, we have the 0:14:48.280 --> 0:14:53.480 danger of reacting prematurely and the danger of acting too 0:14:53.520 --> 0:14:57.120 little and too late. So it's and and if that 0:14:57.200 --> 0:15:01.320 trade off is not an enviable one in the advanced economies, 0:15:01.360 --> 0:15:07.040 it's even steeper UH in the developed world. In developing world, 0:15:07.360 --> 0:15:10.520 where we've already seen a number of central banks do 0:15:10.640 --> 0:15:16.960 a very aggressive rate heights, and not coincidentally, it very 0:15:17.080 --> 0:15:22.040 much relates to the social unrest that countries like Brazil 0:15:22.120 --> 0:15:26.720 are saying over what are spiraling food and energy crisis. 0:15:27.600 --> 0:15:31.120 I do have the concern that if we continue to 0:15:31.240 --> 0:15:37.560 view this as a very transient feature, that response may 0:15:37.800 --> 0:15:41.200 indeed mimic some of the errors we saw in the 0:15:41.280 --> 0:15:52.360 nineteen seventies. Let me stop there, Thank you comment, doctor Isabel. 0:15:52.560 --> 0:15:55.920 I think this will be the debate that we are 0:15:55.960 --> 0:15:59.840 going to have going forward. I mean, in them over 0:16:00.120 --> 0:16:05.560 is past decade where inflation was always below the target, 0:16:05.720 --> 0:16:10.120 we we basically I mean we were facing shocks both 0:16:10.280 --> 0:16:13.480 on the supply and on the remand side that we're 0:16:13.520 --> 0:16:17.080 more deflationary. But it may actually be that we are 0:16:17.240 --> 0:16:20.800 that this is now changing. And one reason why why 0:16:21.640 --> 0:16:26.680 it is changing is actually the green transition. And I mean, 0:16:26.720 --> 0:16:30.000 if you if you think about something like carbon prices, 0:16:30.640 --> 0:16:34.560 you can of course think of it as like supply 0:16:34.760 --> 0:16:39.080 side shocks. And we will have many of those going 0:16:39.160 --> 0:16:43.360 forward again and again and again and again, and then 0:16:43.400 --> 0:16:46.720 the question comes up, what are we going to do 0:16:46.800 --> 0:16:50.120 about it? Can we say that we are just going 0:16:50.160 --> 0:16:53.920 to look through all of that, even though of course 0:16:54.000 --> 0:16:58.480 it does we use the purchasing power of people. And 0:16:58.680 --> 0:17:02.080 this is a very difficult topic. I think we need 0:17:02.200 --> 0:17:06.439 much more research on there. It's an open question, but 0:17:06.600 --> 0:17:10.520 these are very difficult questions, and I think there's not 0:17:10.640 --> 0:17:14.320 yet a good answer to that. Our economists have just 0:17:14.359 --> 0:17:18.240 done some research into into this which talks about the 0:17:18.280 --> 0:17:21.159 likelihood of more and more shocks to inflation, but also 0:17:21.240 --> 0:17:24.320 the inflationary impact of just moving to a higher carbon price. 0:17:24.720 --> 0:17:27.040 You know, there's a there's a straightforward impact of that, 0:17:27.080 --> 0:17:29.400 and then there's, as you say, the potential for lots 0:17:29.400 --> 0:17:32.479 of more a lot more variability of inflation and supply 0:17:32.560 --> 0:17:37.160 side shocks on either on either side. Um militia. When 0:17:37.200 --> 0:17:41.480 you were talking earlier and you were talking about the 0:17:41.520 --> 0:17:47.680 importance of the central bank flagging up the potentially unequal 0:17:47.720 --> 0:17:51.080 impact of its policies in this in various ways, I 0:17:51.080 --> 0:17:53.280 guess I was wondering, Okay, but what do you do 0:17:53.359 --> 0:17:55.560 if you haven't got a well behaved government, if you 0:17:55.600 --> 0:17:58.560 haven't got a government that actually responds to any of 0:17:58.640 --> 0:18:02.919 your um careful explanations of what they might want to 0:18:02.960 --> 0:18:06.359 do to correct the impact of your policies, And if 0:18:06.400 --> 0:18:08.960 you have a government that isn't putting in place and 0:18:09.040 --> 0:18:13.440 a good environment for for investment and isn't discouraging people 0:18:13.480 --> 0:18:17.520 from doing lots of precautionary savings by having good social 0:18:17.560 --> 0:18:20.240 safety nets. So what a central banks supposed to just 0:18:20.320 --> 0:18:22.879 wash their hands at that point? Well, I think it 0:18:22.920 --> 0:18:25.720 goes in two steps. I mean, I think you know 0:18:25.760 --> 0:18:29.439 the first step is you, uh, you share the analysis 0:18:29.520 --> 0:18:31.199 with the government. And I think most of us have 0:18:31.280 --> 0:18:33.159 been in central banks now that central banks tend to 0:18:33.160 --> 0:18:37.120 be slightly better resource than ministries of finance and they 0:18:37.160 --> 0:18:42.840 have don't tell anyone they have deeper analytical capacity than 0:18:42.960 --> 0:18:47.960 ministries of finance UM. And I think those initial that 0:18:48.080 --> 0:18:51.119 first step can be done behind closed doors and saying 0:18:52.000 --> 0:18:55.040 here's what our analysis shows is happening to income distribution, 0:18:55.119 --> 0:18:59.679 this is what our analysis shows is happening to food 0:18:59.680 --> 0:19:01.760 price is and what that means for certain types of 0:19:01.800 --> 0:19:07.280 household for certain parts of the country, um and and 0:19:07.480 --> 0:19:13.239 giving elected political leaders at least the information so that 0:19:13.280 --> 0:19:16.320 they can't say we didn't know that this was happening. 0:19:16.320 --> 0:19:19.080 I think that's that one. I think it's that too, if, 0:19:19.160 --> 0:19:21.680 as you say, Stephanie, there's a government that's actually unwilling 0:19:21.760 --> 0:19:25.200 to act. I don't think that should change central banks 0:19:25.240 --> 0:19:27.679 adherence to their mandates, and they should subviously say, ah ha, 0:19:27.800 --> 0:19:30.040 we will be the white knight who will resolve the 0:19:30.080 --> 0:19:34.399 income distributional or climate change consequences. But I do think, 0:19:35.240 --> 0:19:37.280 you know, there have been many brave central bankers in 0:19:37.320 --> 0:19:41.040 recent years who have gone public with some of this 0:19:41.240 --> 0:19:44.560 kind of analysis, uh, and simply just by putting it 0:19:44.600 --> 0:19:47.320 in the public domain but not necessarily acting on it, 0:19:47.359 --> 0:19:50.400 I think can be quite powerful. Uh. And so that's 0:19:50.400 --> 0:19:53.080 what I would argue should be done in cases where 0:19:53.080 --> 0:19:56.640 governments are unwilling to deal with some of these wider consequences. 0:19:57.480 --> 0:20:00.040 I actually had this this comment already when I I 0:20:00.920 --> 0:20:06.080 heard um news very nice remarks. I actually think we 0:20:06.200 --> 0:20:08.240 have to go as central banks, we have to go 0:20:08.320 --> 0:20:11.040 a bit beyond what she said. So I think it's 0:20:11.080 --> 0:20:14.720 it's not enough to simply tell governments so you see 0:20:14.760 --> 0:20:19.639 here there's a distributional problem, please do something about it. Um. So. 0:20:19.680 --> 0:20:22.440 I don't think that's enough, because of course we do 0:20:22.600 --> 0:20:26.639 have some leeway what we do precisely, so we have 0:20:26.840 --> 0:20:29.520 lee way which tools to use. And if we know 0:20:30.119 --> 0:20:37.400 that that certain tools have UM stronger distributional consequences than others. 0:20:37.440 --> 0:20:41.440 That may be an argument for using one tool and 0:20:41.520 --> 0:20:45.520 not the other. Similarly, it may actually affect the calibration 0:20:45.840 --> 0:20:48.359 of our tools. So for example, I mean in our 0:20:48.520 --> 0:20:53.040 strategy we have this concept of the medium term um 0:20:53.320 --> 0:20:57.320 which which gives us a bit of flexibility regarding the question. 0:20:57.720 --> 0:21:00.359 At one other point I would like to to us 0:21:00.440 --> 0:21:03.879 is that, of course one one cannot take the position 0:21:04.400 --> 0:21:08.680 that central banks should not care at all about distributional 0:21:08.720 --> 0:21:13.200 effect because I mean, these distributional effects out of course 0:21:13.280 --> 0:21:16.240 there and the way we act does have these effects. 0:21:16.280 --> 0:21:18.080 Or we are not. We are never neutral. We are 0:21:18.119 --> 0:21:22.920 never neutral, and I think we cannot we cannot ignore that, 0:21:22.960 --> 0:21:25.400 but we we have to, and we have to raise 0:21:25.440 --> 0:21:27.840 awareness of that and have to be honest about that. 0:21:28.840 --> 0:21:31.440 Ellen has had a great question, which I think because 0:21:31.440 --> 0:21:33.080 we're not we're not going to end up with that 0:21:33.160 --> 0:21:35.200 much time. But I'm interested in what any of you 0:21:35.240 --> 0:21:39.159 think about it. So she was she suggests um that 0:21:40.040 --> 0:21:43.960 central banks seem like it's a policy success. You know 0:21:44.040 --> 0:21:47.280 that we've had these institutions that we made independent and 0:21:47.320 --> 0:21:49.640 that made policy better, and they were able to look 0:21:49.680 --> 0:21:53.199 through the political cycle and cooperate with one another to 0:21:53.320 --> 0:21:59.000 achieve global objectives. Um. Should we be looking to reproduce 0:21:59.080 --> 0:22:03.760 that model for other crucial public goods like not least 0:22:04.240 --> 0:22:09.440 getting an effective carbon price? Um? And she suggests maybe 0:22:09.480 --> 0:22:13.800 having independent carbon councils for setting carbon prices. But just wonder, 0:22:13.840 --> 0:22:16.000 I mean, even if we don't think there could necessarily 0:22:16.000 --> 0:22:19.840 be a global Carbon Council tomorrow unless unless COPED twenty 0:22:19.880 --> 0:22:24.119 six does something very interesting. Um, But is that? Do 0:22:24.160 --> 0:22:26.879 we think there's there's other areas of public policy that 0:22:26.920 --> 0:22:30.880 we should be following the central bank model minusia maybe? 0:22:31.040 --> 0:22:35.520 Or well, I mean it's interesting there are some domains 0:22:35.560 --> 0:22:39.040 in which it's been possible to d politicized aspects of 0:22:39.080 --> 0:22:41.800 decision making, and central banks are a really good example. 0:22:42.560 --> 0:22:47.080 Many countries have independent fiscal councils now which independent of 0:22:47.119 --> 0:22:52.400 the finance ministry, assess the budget and report on fiscal 0:22:52.520 --> 0:22:56.159 policy in a neutral way. There's about forty or fifty 0:22:56.160 --> 0:22:59.200 of them now spread around the world. In the US 0:22:59.280 --> 0:23:02.280 they have the base Closure Permission, Yes, base Closure Commission, 0:23:02.320 --> 0:23:06.720 that's right, that would take a neutral view. In some countries, uh, 0:23:07.480 --> 0:23:10.600 the definition of voting districts is done by an independent 0:23:10.720 --> 0:23:14.159 entity that does it on a scientific basis to de 0:23:14.280 --> 0:23:18.840 politicize it. I mean, you know, as a lifelong technocrat, 0:23:19.040 --> 0:23:21.080 I have a lot of sympathy with these kind of 0:23:21.080 --> 0:23:25.120 approaches because it it makes decisions on a rational basis, 0:23:25.119 --> 0:23:27.520 It does all the things that Ellen says in her 0:23:27.760 --> 0:23:34.080 and her question, which is it's you know, rational, accountable, independent, etcetera. 0:23:35.480 --> 0:23:38.040 So I would love I would love to see more 0:23:38.160 --> 0:23:41.360 aspects of government policy being subjected to that kind of rare. 0:23:42.119 --> 0:23:45.680 But the truth is we're in a moment of kind 0:23:45.680 --> 0:23:49.920 of nationalism and populism and and increasing you know, wearing 0:23:49.960 --> 0:23:55.240 a mosque has become political um and so it feels 0:23:55.280 --> 0:23:59.359 like we're not at a at a moment when taking 0:23:59.400 --> 0:24:03.720 things out of the political realm seems very likely. But 0:24:03.800 --> 0:24:05.800 I do think we need to keep thinking about where 0:24:05.800 --> 0:24:08.680 those opportunities are. And maybe you're right, maybe carbon is 0:24:08.720 --> 0:24:12.240 the one is the next place where thinking about just 0:24:12.280 --> 0:24:15.000 as an example, uh, you know, one of the biggest 0:24:15.000 --> 0:24:19.480 issues with carbon markets is that, uh there is uh 0:24:19.760 --> 0:24:23.840 there is complete inconsistency in the way that carbon credits 0:24:24.119 --> 0:24:29.199 offsets emissions trading. It's the wild West. I mean I 0:24:29.240 --> 0:24:31.840 know this personally because the LC just announced that we're 0:24:31.840 --> 0:24:36.040 the first carbon neutral university in the UK. But when 0:24:36.040 --> 0:24:38.840 we went to try and buy carbon credits it was 0:24:38.920 --> 0:24:41.800 the wild West. I mean it was it was completely 0:24:41.920 --> 0:24:45.480 unregulated and we had to work really hard. And that 0:24:45.640 --> 0:24:51.040 might be an area where, for example, independent entities could 0:24:51.080 --> 0:24:54.320 be created to do verification. At the moment, there's a 0:24:54.359 --> 0:24:57.119 proliferation of lots of little NGOs that do this. But 0:24:57.200 --> 0:24:59.159 if we're going to have a serious carbon market and 0:24:59.200 --> 0:25:02.240 financial inst tuitions are going to have to verify this stuff, 0:25:03.080 --> 0:25:06.199 maybe we need an independent entity that isn't the Central 0:25:06.200 --> 0:25:10.480 Bank but looks like an independent institution that would enable 0:25:10.520 --> 0:25:14.520 that market to function. And maybe there's enough political support 0:25:14.680 --> 0:25:17.520 that we might actually get it in that domain, even 0:25:17.520 --> 0:25:20.320 though we can't get it happens. So the environmental equivalent 0:25:20.320 --> 0:25:23.760 of the of the generally accepted accounting principles, which many 0:25:23.800 --> 0:25:26.800 people would say had made played a very big role 0:25:26.840 --> 0:25:31.840 in exactly global capitalism globalization. Carmen or or Isabel, what 0:25:31.960 --> 0:25:36.680 do you think about this suggestion? Well, let me say 0:25:36.720 --> 0:25:39.199 that a concern that I have at the moment is 0:25:39.240 --> 0:25:43.080 that the pendulum actually is swinging in the other direction. 0:25:43.840 --> 0:25:48.439 Central bank independence was a really big movement. It really 0:25:48.520 --> 0:25:51.720 took of course route first in the advanced economy and 0:25:51.760 --> 0:25:57.320 then spread to the emerging markets and developing countries. So 0:25:57.760 --> 0:26:02.480 my concern in response to her lens question, is that 0:26:04.400 --> 0:26:10.480 in this more politicized environment, more much more by modal views, 0:26:10.720 --> 0:26:15.040 if you will, bipolar by modal views, if you will, 0:26:16.160 --> 0:26:21.720 the pendulum is actually unfortunately moving in the opposite, in 0:26:21.760 --> 0:26:32.600 the artosite direction. I wanted to sort of I'll go 0:26:32.720 --> 0:26:35.760 back to this question of distributional consequences, but it relates 0:26:35.760 --> 0:26:37.560 to some of the things that we were saying about 0:26:37.560 --> 0:26:43.400 the changing political climate. People are blaming central bank policy 0:26:43.680 --> 0:26:50.440 for uh penalizing savers and increasing wealth inequality, and many 0:26:50.520 --> 0:26:55.800 populous leaders are making central bank scapegoats for you in 0:26:55.840 --> 0:26:59.119 their arguments against the current system. So I guess I 0:26:59.160 --> 0:27:02.119